February 22, 2010

What Does Lardaro's Index Mean?

Justin Katz

It seems as if URI Economics Professor Len Lardaro is changing his explanation of his index in a subtle, but significant, way:

The Current Conditions Index fell to 33 in December, down from 50 in November and 42 in October. But Lardaro emphasized that the latest report was not uniformly negative. ...

The Current Conditions Index uses a dozen national and local economic indicators to track the state’s economic performance. A reading of 0 would mean no indicators improved compared with a year earlier, while 100 would mean all 12 improved.

December was the eighth consecutive month that saw Lardaro's index top its year-earlier level, as four the 12 indicators showed month-over-month improvement, including manufacturing wages, the size of the labor force and new claims for unemployment benefits.

Every explanation that I've read up to now has stated that a score below 50 means contraction and a score over 50 means expansion. (I also thought the indexes compared each month to a year earlier, not the prior month.) Have we just been shrinking for so long that Lardaro has to delve deeper to find a positive message?

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My understanding on the <50 and >50 was the same as yours. But I also believed it was compared to the prior month, not same month from a year ago.

Posted by: Patrick at February 22, 2010 2:40 PM

You are both right, according to his own web site...


Posted by: Donald Botts at February 22, 2010 2:45 PM

That is pretty odd that he'd use a cox.net web site to host all of that. I'd think that URI would want that on their servers. Unless of course, he works on the index completely on his own time.

Posted by: Patrick at February 22, 2010 3:45 PM